Firm Financial Condition and Airline Price Wars

Meghan R. Busse (meghan@haas.berkeley.edu)
Additional contact information
Meghan R. Busse: Haas School of Business

Yale School of Management Working Papers from Yale School of Management

Abstract: A firm that knows that cutting price may trigger a price war must weigh present versus future gains and losses when considering such a move. The firm's financial situation can affect how it values such tradeoffs. Using data on 14 major airlines between 1985 and 1992, I test the hypothesis that firms in worse financial condition are more likely to start price wars. Empirical results suggest that this is true, particularly for highly leveraged firms. The article also explores which firms join existing price wars and finds that a firm is more likely to enter a price war the greater the share of its traffic on routes served by the price-war leader.

Date: 2002-05-15
References: Add references at CitEc
Citations: View citations in EconPapers (56)

Downloads: (external link)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=307727 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ysm:somwrk:ysm281

Access Statistics for this paper

More papers in Yale School of Management Working Papers from Yale School of Management Contact information at EDIRC.
Bibliographic data for series maintained by (som.extra@yale.edu).